Findings of Fact 154 Ct. Cl. (d) At this time plaintiff knew that the issue as to the effective date of General Order 71 was pending decision by Maritime. It knew that one possible outcome of that decision might be the retroactive application of General Order 71 to those operators who signed a contract containing Article I-14-c. Plaintiff hoped, however, that Maritime would consider the objections of the industry and forego such retroactive application. 50. (a) On September 28, 1951, a resumption addendum was signed by Oceanic Steamship Company. This addendum contained the rollback authorization clause, I-14-c." (b) On October 5, 1951, plaintiff's resumption addendum was signed, becoming Contract FMB-12, the pertinent provisions of which are set forth in finding 21. (c) Plaintiff signed Contract FMB-12 in full realization of the possible use by Maritime of Article I-14-c to roll back the effective date of General Order 71 to January 1, 1947. (d) From January 1, 1947, to October 5, 1951 (the date of Contract FMB-12), plaintiff adhered to all of Maritime's requirements of a subsidized operator. Its operations had been conducted pursuant to understanding, on the part of plaintiff and Maritime, that plaintiff was a subsidized operator.50 51. (a) Among the causes for the delay in the execution of plaintiff's resumption addendum were the following: (1) Computation of the applicable subsidy rates, to equalize the specified costs of plaintiff's foreign flag competition, was difficult and prolonged. (2) The right of plaintiff to carry intercoastal passengers and cargo on its round-the-world service was challenged by other lines. The question was resolved, after public hearing, on June 13, 1951. (3) There were doubts that there was sufficient foreign flag competition to warrant subsidy payments on the transpacific combination passenger-cargo vessels. This service was 49 Oceanic's recapture period expired on December 31, 1947. When the rollback was ultimately applied to it, the increase recapture amounted to approximately $43,800. 50 Plaintiff could not, however, submit vouchers for payment of subsidy for its operations after January 1, 1947, until after the execution of Contract FMB-12 on October 5, 1951. Meanwhile, on March 8, 1951, Maritime approved payment by plaintiff of a dividend to preferred stockholders. 695 Findings of Fact omitted from the original Contract FMB-12 in order to avoid further delay in the execution of the resumption addendum.51 (4) Differences of opinion within the Government as to the proper construction-differential subsidy rate for the construction of three combination vessels and on improvements to three freighter vessels delayed Maritime's consideration of the resumption addendum to the operating differential subsidy contract. The three vessels under construction were taken over by the Navy in September 1950, for defense purposes. Further delay ensued in reaching agreement on a revised replacement program.62 (b) Maritime's prolonged consideration of the definition of capital necessarily employed or of the effective date of General Order 71 was not a specific cause of delay in the execution of plaintiff's resumption addendum, beyond the delay inherent therein applicable to all other subsidized operators. 52. (a) On September 17, 1952, Maritime issued Amendment 1 to General Order 71, wherein (1) the original General Order 71 definition of capital necessarily employed was modified to permit the inclusion of funds actually disbursed for the purchase or reconstruction of vessels during the period from December 31, 1946, to the end of the recapture periods then current; and (2) the effective date of General Order 71 was rolled back, as to those operators whose resumption addenda were executed after April 30, 1951, to January 1, 1947. (b) In issuing the amendment, Maritime appended a detailed explanation of its action. Pertinent excerpts follow: *** A retroactive application unilaterally by the Board of the General Order 71 definition to the contracting operators in violation of Article II-29 of their resumption addenda would constitute not only a breach of contract by the Government, but also action in violation of the express Congressional intent that holders of operating subsidy contracts should thereby obtain "a fair measure of stability" in the governmental policy as embodied in such contracts. *** 51 The issue was put to public hearing, submitted on May 5, 1952, decided in favor of subsidization on September 3, 1952; and on September 25, 1952, by Addendum No. 1 to Contract FMB-12, the service was included in subsidized operations. 52 Agreement was reserved in the resumption addendum, as had been the case in the original operating differential subsidy contract, as to the replacement program, by a clause making the undertaking by plaintiff of a replacement program satisfactory to Maritime, a condition to continued subsidization. Findings of Fact 154 Ct. Cl. Accordingly, we find that we are not free to impose either the original or an amended General Order 71 definition upon the contracting lines prior to the end of their recapture periods which were current on December 31, 1946. As to the four other non-contracting operators, we are free to exercise policy judgment untrammeled by contractual commitments. Under the authority conferred by section 607 (d) there is both the power and the duty to amend the definition of "Capital Necessarily Employed" to whatever extent may be necessary to promote the policies and purposes of the Act. We are conscious of the desirability of equal treatment of both contracting and non-contracting operators. That we are barred by contractual obligations from applying uniformly a definition which we believe to be sound does not justify, in our opinion, the granting to the non-contracting operators a definition which we would not have favored were we in the original proceeding. Considerations favoring a sound rule outweigh the considerations of uniformity when uniformity carries with it the extension of a rule which, in our opinion, does not represent a reasonable solution of the problems faced in 1946. (c) Plaintiff filed with Maritime a timely petition for reconsideration of the decision. The petition was denied on December 18, 1952, without opinion. (d) Plaintiff has since reserved its rights, with the concurrence of Maritime, to assert the position now taken with respect to the application of General Order 31 to the recapture period ending on September 30, 1948. V. CONCLUSIONS A. Maritime 53. (a) At the time of the rollback decision and action (September 17, 1952), Maritime knew (1) that the eight operators who signed resumption addenda before May 1, 1951, occupied a more favorable position by reason of the application of General Order 31 to their recapture periods current on December 31, 1946, than did other operators; (2) that two of the operators (American Export Lines and New York and Cuba Mail Line), whose resumption addenda were signed after April 30, 1951, but before September 17, 1952, had waived subsidy payments for the year 1947; and (3) that 695 Findings of Fact only two operators (plaintiff and Oceanic) remained as "non-contracting" lines, to be affected by the rollback. (b) The members who comprised the Federal Maritime Board in September 1952 announced the rollback action as being in conformity with the course which they then thought they would have followed in 1946 if they had then been in position to make the decision.53 The good faith of Maritime is not in issue. (c) The rollback action was predicated on contractual rights specified in the resumption addenda of plaintiff and Oceanic.54 There was no suggestion in the Maritime opinion of any other factual difference between plaintiff and Oceanic on the one hand, and the eight other operators on the other.55 (d) The cutoff date of May 1, 1951, in Amendment 1 to General Order 71, was established in discussions which followed the publication on March 22, 1951, of the Comptroller General's further audit of Maritime (finding 44).56 The selection of the date represented a practical differentiation between operators who had and those who had not signed resumption addenda. B. Moore-McCormack 54. (a) Of the eight operators who had signed resumption addenda before May 1, 1951, agreements had been completed with seven of them a year earlier, May 1, 1950. The eighth operator to sign was Moore-McCormack, on March 8, 1951.57 That we are barred by contractual obligations from applying uniformly a definition which we believe to be sound does not justify the granting to the non-contracting operators a definition which we would not have favored were we in the original proceeding. Considerations favoring a sound rule outweigh the considerations of uniformity when uniformity carries with it the extension of the rule which *** does not represent a reasonable solution of the problems faced in 1946." Document No. 73, Joint Stipulation, p. 256, at p. 275. 54 "The new rule is applicable only to those * non-contracting operators whose resumption addenda, dated subsequent to May 1, 1951, expressly gave the Board a free hand in the matter of promulgating a new definition of 'Capital Necessarily Employed,' including a new effective date." Id. Nothing was cited suggesting any matters of shipping economics or practice, or differences in routes, financing, or operation, to warrant differentiation. 5 The audit report emphasized the earlier recommendation by the Government Operations Subcommittee of the Committee on Expenditures in the Executive Departments of the House of Representatives that "the effective date of the revised definition be again reviewed. 67 Finding 38. Findings of Fact 154 Ct. CL. Maritime later explained its action with respect to MooreMcCormack on the ground that the operator's endorsement of the Commission's memorandum constituted "* * * an informal but none the less binding contract*** to give, and *** to accept *** Article II-29.” 58 (b) Maritime's memorandum to Moore-McCormack was dated February 10, 1950. Nearly a year earlier, on May 13, 1949, a similar memorandum had been sent to plaintiff. Instead of endorsing the memorandum, plaintiff replied by separate letter calling attention to "certain minor needed refinements" (dealing with route descriptions and annual sailings) and saying that "subject to the above, we concur ***" Maritime acknowledged the letter as "concurring in substance." 59 (c) Moore-McCormack qualified its endorsement by calling attention to certain needed minor refinements relating to route descriptions and sailing schedules. Plaintiff concurred in Maritime's action by separate letter. The difference between the two situations is technical. (d) It is not established by the evidence that plaintiff raised with Maritime or that Maritime considered the question of plaintiff's right to be accorded the same treatment as Moore-McCormack. C. Plaintiff 55. (a) When plaintiff entered into Contract FMB-12, it understood fully the purpose and potential of Article I-14–c. (b) With respect to the rollback of General Order 71, plaintiff feared the worst while hoping for the best. Except for such hope, there is no indication in the evidence that the parties had in contemplation some use of Article I-14-c which would entail changes other than those ultimately made. VI. APPENDIX 56. Pertinent provisions of the Merchant Marine Act of 1936 follow: Section 101. It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine 58 Finding 43. 50 Finding 33. |